When should I choose credit and when should I choose debit?

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The first choice you’ll need to make in this regard is whether you should even open a credit card account. Are you a responsible spender with excellent self-control, or are you prone to making spontaneous purchases? If the former, you should sign up for a credit card and start building your credit history; if the latter, you should consider signing up for a credit card only if you can trust yourself to keep it in a desk drawer and use it only under appropriate circumstances (most importantly, when you actually have the money to pay off the purchase).

Assuming you can afford the purchase, credit cards are generally preferable for the following reasons:

  • Rewards, such as 1% cash back, can add up to $100+ per year.
  • Transactions are contestable, and thus you have additional recourse in the event that you order goods sigh-unseen and they arrive damaged or otherwise not as advertised.